In debt and living on a pension: One in five retiring this year will owe more than £30,000

Thousands of Britons planning on retiring this year will do so saddled with debts of more than £30,000, a study has found.

One in five people surveyed in Prudential's Class of 2013 research admit they will retire this year in debt, with the average amount owed standing at £31,200 - most commonly in the form of credit card debt or outstanding mortgages.

The good news is that this is a significant fall on last year, when the average amount owed by people retiring in debt stood at £38,200, indicating that people are getting a better handle on their finances prior to taking their pension.

Retiring in debt: Thousands of Britons are entering retirement in 2013 with hefty debts in excess of £30,000, although this has fallen from the amount owed by 2012 retirees.

But retirement incomes are also expected to be lower, with MGM Advantage finding that someone buying an annuity this year can expect an income worth £14,000 less over 20 years than one bought in January 2010.

Vince Smith-Hughes, a retirement income expert for Prudential, said: 'The fall in average debt owed by this
year’s retirees is a welcome sign that people are paying off some of the
money they owe before they stop working.

'But when people’s finances are still
under pressure, with expected retirement incomes at a six-year low...it’s important to ensure debt
repayments do not eat into retirement incomes too much or for too long.

'Paying off debt as early as possible – preferably while still working –
will help to ensure that retirees have more disposal income, in turn
enabling them to enjoy a more comfortable retirement.'

On average, those retiring with debt expect to make repayments of £215 a month and expect it will take just under four years to clear the money they owe.

Men are the main reason why the amount of debt retirees have has fallen between 2012 and 2013, with the average they owe plummeting from £45,300 last year to £33,800 this year; while for women it fell from £29,400 to £28,100.

Unsecured borrowing accounts for the majority of debt, with more than half owing money on credit cards, while one in five have an outstanding bank loan or overdraft.

Regionally, people in Wales are the most likely to retire in debt, with 26 per cent still owing money, while those in Yorkshire and Humberside have been the most careful with their money, with just 13 per cent taking debts into retirement.

Regional breakdown: People in Wales are more likely to retire this year with unpaid debts, while more people in Scotland and Yorkshire will be debt-free.

Fewer owe money on their mortgages, 43 per cent down from 50 per cent in 2012.

In October, Key Retirement found that more than 100,000 people over the age of 65 are paying off their mortgages, with many turning to taking out loans against the value of their property through equity release.

The average amount owed by those taking out an equity release plan, Key Retirement said, stood at £14,526, but in some extreme cases pensioners are dealing with credit card debts as high as £95,000, while others were paying off £100,000 unsecured loans.

Mr Smith-Hughes added: 'Debt does not have to be a major issue for people in retirement as long as they have sufficient income, and realistic and manageable repayment programmes in place.

'There is plenty of free help and advice available through the Money Advice Service and Citizens Advice Bureau for those with debt issues.'